Monday, March 21, 2016 / by Vanessa Saunders
Tax season is winding up, and some of us are still sorting out W2s, receipts and documents to determine all the tax deductions we may have, while others are sitting back and (hopefully) waiting for the refund checks. But either way, you should already be thinking about next year: taxes should be on your mind so that next year's returns go smoothly and you can plan around allowed deductions. If you own your own home, you may be entitled to tax deductions that you don't even know about. Before you file your taxes, take a look at this list of homeowner tax deductions — you could save thousands of dollars!
You can deduct the interest you paid on your mortgage if you have taken out a loan to purchase your home, with a balance of up to $1 million. Rather than taking the standard deduction, you will have to itemize to access the deduction. There are, of course, limitations, such as if you are helping out a friend or family member by paying his or her mortgage — that interest cannot be deducted on your tax return.
You can also list state and local property taxes as itemized deductions on your taxes. The amount of the deduction will depend on when you pay the tax, not when it is due. Paying your property taxes earlier could have a positive effect on your tax return.
Do you work from home or have a dedicated space only for when you need to work? If so, you can deduct it as a home-office expense. It doesn't even have to be an entire room — it can be a portion of a room or just a dedicated space.
Discount points are paid to reduce the interest rate on your mortgage loan and can be deducted for the entire year they were paid. Also, if you are buying a home and the seller pays the points as a bonus to get you to buy the house, you can deduct those points as well.
Did you rent out your home for two or fewer weeks during the course of the year? If you did, the income on the rental has the potential to be tax-free.
Energy-Efficient Tax Credit
You can reap the benefits of an energy-efficient tax credit of 10 percent of the amount you paid for green improvements to your home, like energy-efficient windows, storm doors, and heating and air conditioning systems.
If you owned a home that was sold in a short-sale, you can take advantage of mortgage-debt forgiveness. For example, if you make a short sale of your home at $350,000 and you owe $450,000 on your mortgage, your lender will forgive that $100,000 you owe, and you also don't have to pay taxes on that money.